As fears of a prolonged regional war become more concrete, it’s no surprise that the traditional safe haven asset – gold – continues its upward ascent. Though, as Robert Armstrong suggests in the Financial Times, “gold has become a bit less of a safe haven and more of a speculative asset now that it is more expensive in real terms”. The price has been rising and recent event have done nothing to decelerate that trend.

The US dollar has also been up driven by safe haven demand, a phenomenon that may not be especially notable except insofar as it marks something of a turnaround from Sell America sentiment that had dominated headlines.

At least part of the story is related to rising energy prices, as Qatari energy production was forced to a halt.

Rising energy prices could in turn affect the US Fed’s willingness to cut rates. As one ING analyst pointed out, “higher energy prices and questions over the Fed’s ability to cut rates will stop and potentially reverse portfolio flows into emerging markets”.

Again, this potentially points to a reversal of a trend, with dollar weakness and outsized emerging market performance among the invest stories of the last year.

What is the market telling us? So far, the pattern is a familiar one. An potential oil shock threatens inflationary pressure, gold moves even higher, and the dollar firmed. Yet these are unfamiliar macro times. For much of the past year, “Sell America” was the watchword of uncertain market observers. But at crunch time, is there still really only one macro game in town?

If energy prices stay elevated and rate-cut expectations are pared back, arguably the narrative of pf capital rotating decisively away from the United States will be challenged. Is this the reassertion of US economic pre-eminence and the undisputed role of the greenback? Or will repeated geopolitical shocks triggered by US foreign policy accelerate efforts at diversification and de-dollarisation over the longer term?

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